Anderson Living Trust et al v. Energen Resources Corporation

Filing 256

MEMORANDUM OPINION AND ORDER by Chief District Judge William P. Johnson GRANTING 235 Plaintiffs' Narrowed Motion for Class Certification. (mag)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
______________________________
THE ANDERSON LIVING TRUST f/k/a
THE JAMES H. ANDERSON LIVING
TRUST, et al.,
Plaintiffs,
v.

No. 13-CV-00909 WJ/CG

ENERGEN RESOURCES CORPORATION,
Defendant.
MEMORANDUM OPINION AND ORDER
GRANTING PLAINTIFFS’ NARROWED MOTION FOR CLASS CERTIFICATION
THIS MATTER comes before the Court upon Plaintiffs’ Narrowed Motion for Class
Certification Filed Pursuant to District Court Order of July 23, 2018 (Doc. 235). Having reviewed
the parties’ pleadings and the applicable law, the Court finds that Plaintiffs’ motion is well-taken
and, therefore, is granted.
BACKGROUND
Plaintiffs are four trusts owning royalty interests in oil and gas wells that filed a putative
class action complaint against Defendant Energen Resources Corporation (“Energen”). Energen
is the owner and operator of oil and gas wells in the San Juan Basin, located in Northwestern New
Mexico and Southern Colorado. Plaintiffs allege that Energen was systematically underpaying
royalties due them from the production of oil and gas from the wells in which they own royalty
interests. On appeal, the Tenth Circuit affirmed this Court’s rulings granting summary judgment
to Defendant on claims asserted by two of the Plaintiffs, but remanded certain claims asserted by
the Neely-Robertson Revocable Family Trust which owns royalty interests in New Mexico oil and

gas wells, and the Tatum Living Trust which owns royalty interests in wells located in Colorado.
See Anderson Living Tr. v. Energen Res. Corp., 886 F.3d 826, 847 (10th Cir. 2018) (“ALT”).
Energen Resources Corporation operated and produced natural gas from approximately
112 wells in the State of Colorado (see Energen’s expert report, Doc. 158-1, p. 15) from 2004 until
2015, when it conveyed its interests to Southland Royalty Company. Energen’s gathering, treating
and processing agreements with “Red Cedar” allowed the use, as fuel, natural gas from Energen’s
Colorado wells for compression, gas movement, gathering, treating and processing volumes of
natural gas produced from the Tatum Trust and Class Members’ wells. It is undisputed that
Energen does not pay royalty on the volumes of gas produced from the Tatum Trust and putative
Class wells, which gas is used for compression, field fuel and plant fuel by Energen and its
contracting parties, principally Red Cedar Gathering Company.
As Defendant notes, Plaintiffs now seek to certify a much different class than they
originally proposed. Plaintiffs no longer seek to certify a class consisting of all Colorado and New
Mexico royalty owners and instead restrict the proposed class to the Tatum Trust (“Trust”) and
only Colorado royalty owners with interests in the 153 leases at issue in this case. Also, Plaintiff
seeks class certification based on a single underpayment theory, namely that Energen failed to pay
additional royalties on gas used as fuel and that Energen breached its duty of good faith and fair
dealing by failing to disclose all deductions related to those royalties. Plaintiffs define the putative
class as:
All persons or entities who own non-cost bearing interests that are subject to the
Class oil and gas leases productive of natural gas and other hydrocarbons in the State
of Colorado, which were previously owned in whole or in part by Energen and its
predecessors by name change, conveyance or acquisition. Southland Royalty
Company LLC now owns the leases.

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Doc. 235 at 4. These oil and gas leases provide for the payment of royalty on natural gas used off
the lease premises, and do not contain other language which indicates the lessor is to share the
expense or cost of off-lease processes or gathering activity for which the fuel gas is used.
Colorado has adopted a version of the marketable condition rule, which in its purest form requires
the lessor to market the gas solely at its expense. Under Colorado law, the marketable condition
rule applies only when the lease does not provide otherwise. ALT, 886 F.3d at 830.
DISCUSSION1
The trial court may certify a class only if, after rigorous analysis, it determines that the
proposed class satisfies the prerequisites of Federal Rule of Civil Procedure 23(a). Trevizo v.
Adams, 455 F.3d 1155, 1163 (10th Cir. 2006). Rule 23(a) imposes four prerequisites for class
certification:
(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of the claims or
defenses of the class; and
(4) the representative parties will fairly and adequately protect the interests of the class.
Rigorous analysis by the district court before granting class certification is necessary
because of the “potential unfairness to the class members bound by the judgment if the framing of
the class is overbroad.” Trevizo v. Adams, 455 F.3d 1155, 1163 (10th Cir. 2006) (citing
Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 161 (1982).
A class action may be maintained if Rule 23(a) is satisfied and if falls into one of the types
of class actions described in Rule 23(b). Plaintiff contends that the putative class satisfies Rule

Both parties have submitted expert reports. Doc. 235-1 (Kaplin Rep’t) and Doc. 240-1 (Emory Rep’t). In reaching
its conclusion here, the Court has accorded them the proper weight when considering them along with the other
evidence presented by the parties.
1

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23(b)(3)’s requirements of predominance and superiority. Harrel’s LLC v. Chaparral Energy,
LLC (Naylor Farms, Inc.), 923 F.3d 779, 789 (10th Cir. 2019).
Rule 23(c) requires the Court to “define the class and the class claims, issues, or defenses.”
Fed. R. Civ. P. 23(c)(1)(B); see Abraham v. WPX Prod. Prods., LLC, 317 F.R.D. 169, 254 (D.N.M.
2016) (citing cases); Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 592–93 (3d Cir.2012)
(“essential” prerequisite to a rule 23(b)(3) class action is that the “class must be currently and
readily ascertainable based on objective criteria”). It is Plaintiffs’ burden to show that the proposed
class complies with Rule 23. Wallace B. Roderick Revocable Living Tr. v. XTO Energy, Inc., 725
F.3d 1213, 1218 (10th Cir. 2013).
I.

Rule 23(a) Requirements
A.

Numerosity

Rule 23(a)(1) requires that the putative class membership be sufficiently large to warrant a
class action, because the alternative of joinder is impracticable. Some courts have held that
numerosity may be presumed at a certain number; the Tenth Circuit, however, “has never adopted
such a presumption.” Abraham v. WPX Prod. Prods., LLC, 317 F.R.D. 169, 220 (D.N.M. 2016)
(citing Trevizo v. Adams, 455 F.3d 1155, 1162 (10th Cir.2006). Defendant does not challenge this
factor and the Court finds that the proposed class is so numerous that joinder of all members is
impracticable. This factor is therefore satisfied.
B.

Commonality

Rule 23(a)(2) requires that “there are questions of law or fact common to the class.” Fed.
R. Civ. P. 23(a)(2) (emphasis added). A single common question will suffice to satisfy rule
23(a)(2), but the question must be one “that is central to the validity of each one of the claims.”
Wal–Mart Stores, Inc. v. Dukes, 564 U.S. 338, 374 (2011), cited in Abraham v. WPX Prod. Prods.,

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LLC, 317 F.R.D. 169, 221 (D.N.M. 2016). The focus of Rule 23(a)(2)’s commonality requirement
is not so much on whether there exist common questions, but rather on “the capacity of a classwide
proceeding to generate common answers apt to drive the resolution of the litigation.” Wal-Mart,
564 U.S. at 350, cited in Naylor Farms, Inc. v. Chaparral Energy, LLC, 923 F.3d 779, 789 (10th
Cir. 2019) (emphasis in original).
Variations in Leases Language
Energen contends that the Trust’s fuel gas claim also is atypical of any claim held by the
putative Class Members and that in fact, only two leases are the same as the leases held by the
Trust. The leases expressly require royalties to be paid on gas used as fuel, because they “explicitly
prohibit Energen from deducting post-production costs.” ALT, 886 F.3d at 848-49. Defendant
points to language in the Tatum leases:
3/16 of the gross proceeds received by Lessee for all gas (including all substances
contained in such gas) recovered or separated on the leased premises, produced from
the leased premises and sold by Lessee in an arms’ length transaction . . . .
***
Lessor shall not bear, directly or indirectly, any production or post-production cost or
expenses, including without limitation, cost or expenses for storing, separating,
dehydrating, transporting, compressing, treating, gathering, or otherwise rendering
marketable or marketing the Products, and no deduction or reduction shall be made
for any such costs and expenses in computing any payment, or the basis upon which
any payment is, to be made to Lessor . . . .
Doc. 235-3, ¶¶3(b) & (d). Defendant contends that there are only two other leases of the
153 leases containing the same language forbidding Energen from deducting the in-kind postproduction cost of fuel gas and that the other leases contain different language as to the allocation
of post-production costs.2 Defendant has attached portions of several leases to their response in
order to illustrate some of the variations in lease language:

2

While Defendant claims that only two other leases of the 153 leases contain the same language as the Trust
forbidding Energen from deducting the in-kind post-production cost of fuel gas; Plaintiffs’ expert states that there

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-

-

Leases that expressly permit the deduction of costs associated with compression and
gathering. Ex. E at ¶ 3; Ex. G at §3 & Ex. A at 1;
Leases that expressly preclude the deduction of these costs. Ex. F at ¶¶ 3, 19.
Leases that provide for payment on the “amount realized” from the sale of gas in a certain
condition. Ex. H;
Leases that require royalties to be paid on the “greater of” the market value of the natural
gas at the well in a condition acceptable for delivery into a transmission pipeline, or the
gross proceeds received for the sale of such gas. Ex. J at ¶ 4. These leases require an
evaluation of the natural gas’ condition to determine the allocation of costs, which is not
required by the Trust’s leases. Ex. 3 to Mot. at ¶¶ 3(b) and (d).
Leases that are silent on how post-production costs should be allocated. Exs. C-D.

Doc. 240 at 4-5. Plaintiffs claim that this is a “strawman” argument because the “root” of the
Trust’s claim for underpayment of royalty on gas used as fuel is not the allocation or deduction of
post-production costs, but rather the obligation that royalty be paid on gas used as fuel off the
leased premises.3 Plaintiffs’ focus is correct, based on both parties’ acknowledgment that the fuel
gas claim is the single underpayment theory being pursued by Tatum and the putative class, Doc.
235 at 1-2; Doc. 240 at 2, despite Defendant’s attempt to steer the claim elsewhere to postproduction allocation as the common issue. In its appeal decision, the Tenth Circuit held that the
express language of the Tatum lease requires Energen to pay royalty on gas used from the leased
premises when use of the gas occurs off the premises, reversing this Court’s ruling on the fuel gas
issue. ALT, 886 at 850 (10th Cir. 2018).

are only “two leases that are treated differently based on lease language and this is only due to a direct request from
the lessor.” Doc. 235 at 5. It is not clear whether the differences are based on whether the terms are express rather
than implied under Colorado law. These differences are not critical to the Rule 23 commonality analysis here.
Plaintiff states that of the 153 leases at issue, there are only five leases which state that the lessor must share the
expense of activities for which fuel gas is used, and that these have been eliminated from the list of putative class
members. See Doc. 244-1.
Defendant presents another “strawman” argument, claiming that Plaintiffs cannot use common evidence of a
“uniform payment methodology” to satisfy commonality. Doc. 240 at 17. Defendant is correct in that payment
methodology does not establish commonality, particularly where a lease would have to be examined to know when
the gas became marketable and therefore subject to royalty. Roderick, 725 F.3d at 1219 (payment methodology is
“not capable of class-wide resolution”). However, Plaintiffs are not relying on any form of “payment methodology”
to argue any of the Rule 23 factors. Id. (rejecting uniform payment methodology as basis to establish either
commonality or predominance).
3

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Plaintiffs have submitted a chart exhibit that was prepared by their expert. See Doc. 235-1.
The chart consists of five columns with the last two columns setting forth the free use clause and
the gas royalty provision specifying any limitations to the use of free gas. Doc. 235-1; see ALT at
848 (noting that a “free use” clause may be limited by other lease provisions). According to the
chart, each one of leases specifically states that the lessee is to pay royalty on gas used as fuel off
the premises. There are some variations with regard to the listed royalty provisions. Cmp. Doc.
235-1, #8690 (“Gross Proceeds and [sic] specifically prohibits charging of production and postproduction charges” with #8718 (“gas and the constituents . . . market value at the well . . . Of the
product so sold or used . . . amount realized from such sale”). Defendant claims that these
variations in the lease language preclude a finding of commonality, but these variations do not
defeat commonality that exists.
For illustration, Plaintiffs point to two cases where variations in lease language did not
negate the common question related to an implied duty to pay post-production costs under
Colorado law. See Rhea v. Apache Corp., No. CIV-14-0433-JH, 2019 WL 1548909, at *8 ( Feb.
15, 2019) and Naylor Farms, Inc. v. Chaparral Energy, LLC, 923 F.3d 779, 790 (10th Cir. 2019).
Energen tries to distinguish Rhea and Naylor Farms by suggesting that the royalty language in
those leases did not vary from lease to lease, but this is not so. The courts in both Rhea and Naylor
Farms did find language variations within the leases but nevertheless concluded that the leases
contained clauses creating the implied duty to market as a common question, despite those
differences (and thanks to lease charts created by plaintiffs in those cases). Rhea, 2019 WL
1548909, at *8 (“Here, like Naylor Farms, the court has confirmed that plaintiff's lease chart
demonstrates that the leases in this case contain clauses creating the implied duty to market”). The
Court agrees with Plaintiffs that Rhea and Naylor Farms support their position. The leases in those

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two cases created a “uniform obligation to bear post-production costs.” Here too, the proposed
class consists of Colorado royalty owners with leases that impose a single and uniform obligation:
to pay royalty on gas used as fuel.
Energen does not offer any cases which hold that variations in lease language in themselves
preclude a finding of commonality. Energen cites to Wallace B. Roderick Revocable Living Tr. v.
XTO Energy, Inc. for just that purpose; however, the Tenth Circuit did not remand the case because
of variations in lease language but because plaintiffs in that case had failed to carry out their burden
to investigate, review the leases and determine if any leases “negated” the implied duty to market.
725 F.3d at 1219 (“On remand, the Trust could, for example, create a chart classifying lease types
. . . and . . . the district court could decide that no lease type negates the [implied duty to market]”).
In contrast, Plaintiffs here have already done the necessary review and categorization of the leases
that are included within the putative Class. Thus, any language differences among lease provisions
concerning post-production deductions do not defeat commonality. See, e.g., Abraham, 317
F.R.D. at 221 (citing Adamson v. Bowen, 855 F.2d 668, 676 (10th Cir.1988) (commonality is not
defeated here where the claims of individual putative class member may differ factually); In re
Intelcom Group Sec. Litig., 169 F.R.D. 142, 148 (D.Colo.1996) (factual differences in the claims
of the individual putative class members “should not result in a denial of class certification where
common questions of law exist”).
Plaintiff’s lease chart identifies the fuel gas claim that is common to the Colorado royalty
owners. See Naylor Farms, 923 F.3d at 795 (plaintiff’s preparation of chart categorizing leases
at issue by royalty language was “precisely what a plaintiff should do to establish commonality . .
. .”) (citing Wallace B. Roderick Revocable Living Tr. v. XTO Energy, Inc., 725 F.3d 1213, 1220
(10th Cir. 2013); see also Abraham v. WPX Prod. Prods., LLC, 317 F.R.D. 169, 249 (D.N.M.

8

2016) (suggesting that on remand, plaintiffs could “create a chart classifying lease types” to
establish predominance).
Quality of Gas
Energen contends that the proposed class does not meet the requirement of commonality
because of differences in the quality of natural gas produced from Energen’s wells and differences
in market locations. Some gas could meet downstream specifications prior to processing while
some natural gas requires processing to meet those specifications. These questions relate to when
gas becomes marketable. See Roderick, 725 F.3d at 1219 (“Once gas is in marketable condition,
the [implied duty to market] is satisfied—regardless of whether a market exists at that location.”).
Thus, Energen argues, post-production deductions would be proper for gas that has been
determined to be marketable at the well, but would be a breach of the implied duty to market where
gas quality affects the point at which the gas becomes marketable. Id.
There are two flaws with Defendant’s argument. First, and as mentioned above, the
underpayment claim being asserted by the proposed Class is not the deduction of post-production
costs but rather the obligation that royalty be paid on gas used as fuel off the leased premises. Any
differences in allocation of post-production costs relate more to the calculation of damages, which
is not before the Court. See Naylor Farms, 923 F.3d at 790 (finding that any “variations in lease
language” were related to damages and “did not defeat either commonality or predominance”).
Second, as Plaintiffs point out, Energen’s own expert identifies 87 of the 96 Energen wells in
Colorado as “coalbed methane” (“CBM”) and only 9 as “conventional.” Doc. 244-2. CBM always
requires gathering and treating before it can meet pipeline specifications and become marketable.
All are subject to a single gathering agreement with Red Cedar and go only to CBM processing
plants at Red Cedar and Val Verde. Id. at 28. So, even with regard to an allocation of post-

9

production costs, there is a common issue among the leases because the point of marketability is
not as variable or individual as Defendant claims it would be. As the Tenth Circuit noted in its
appeal decision:
The processing of natural gas into a marketable condition is complicated and
depends on whether the gas comes from an oil well (casinghead gas), gas well
(conventional natural gas), or from coal seams (coalbed methane gas).
Anderson Living Trust v. Energen Res. Corp., 879 F.3d 1088, 1094, n.7 (citing ConocoPhillips
Co. v. Lyons, 2013- NMSC 009, 299 P.3d 844, 849-50 (N.M. 2012); see also ALT, 886 F.3d 826,
847 (10th Cir. 2018) (description of processing for coalbed methane gas). Any differences in gas
quality and composition from the wells from the Trust and the proposed Class royalty owners
therefore do not defeat commonality.
Breach of Good Faith and Fair Dealing
This claim is based on Plaintiffs’ allegation that Energen did not disclose the material facts
of deductions from the volumes and values of gas produced from the putative Class Members’
wells. Defendant contends that this claim lacks commonality for two reasons, but the Court finds
neither persuasive enough to deny class certification on the commonality factor. First, Energen
argues that the leases in question do not expressly address the allocation of post-production costs
such as fuel gas and so whether Energen owed a duty to a royalty owner to identify the volumes
of gas used as fuel is a lease-by-lease determination that prevents class certification. This argument
veers off from the sole underpayment claim asserted in this case under a theory of breach of good
faith and fair dealing: that Energen never reported to the Trust the actual volumes of gas produced
and that it would cost more to make the check stub larger in order to incorporate that information.
See Doc. 235 at 7-8; Doc. 158-2 at 10-13. That issue relates to the Trust’s fuel gas claim separate
and remains separate and apart from post-production deductions in general.
10

Second, Defendant contends that the leases have not been examined to determine whether
they confer any discretion on Energen with respect to the contents of its monthly royalty payment
statements. The degree of Energen’s discretion is a matter best left to the merits of the breach
claim. The sole question here is whether the claim presents a common question among the putative
Class members, and the Court finds that it does.
Plaintiffs have satisfied their burden of showing a common question “that is central to the
validity of each one of the claims.” Abraham, 317 F.R.D. at 221. The Trust and the putative
royalty owners have the same factual claims: (a) that they have an oil and gas lease that requires
Energen to pay royalty on fuel gas; and (b) that Energen did not pay the Trust or any of the class
members for fuel gas taken from their wells, nor did they report to them the fuel gas taken.
C.

Typicality/Adequate Representation

Commonality, typicality, and adequacy of representation “tend to merge,” because each
concerns whether “the named plaintiff’s claim and the class claim are so interrelated that the
interests of the class members will be fairly and adequately protected in their absence.” Wal-Mart,
564 U.S. at 350 n.5.
Energen contends that the Trust’s fuel gas claim also is atypical of any claim held by the
putative class members and that it is an inadequate Class representative. Unlike the other leases,
the Trust’s leases expressly address the allocation of post-production costs such as fuel gas, and
therefore do not require an analysis of whether the gas is “marketable” prior to the use of fuel gas,
or whether costs can be deducted for some post-production services, but not others. Many of the
other leases do not address the allocation of costs and thus are subject to the implied duty to market,
and the Trust has no claim for breach of this implied duty. Defendant is correct that the Trust’s
“implied duty to market” claim was dismissed by the Court. See Doc. 232 (Court’s Mem. Op. &

11

Order) at 5-8.4 However, Plaintiffs do not define the potential Class either as royalty owners with
express post-production lease provisions or as royalty owners with a common breach of implied
duty to market pursuant to Colorado law—and Energen has acknowledged this. See Doc. 240 at
12 (noting that Plaintiffs initially pursued a claim on behalf of all owners “based on an overarching
implied duty that applied irrespective of individual lease language . . . [but now] the Trust has
narrowed its proposed class owners paid only under certain leases . . . .”).
The potential Class is now defined as those with royalty owners with leases that required
Energen to pay for gas used as fuel off the premises. Despite the Trust’s express terms regarding
allocation of post-production costs, the Trust’s claim and the class claim are sufficiently
interrelated so that the claim is typical of the class, and the interests of the class members will be
fairly and adequately protected in their absence. See Abraham, 317 F.R.D. 169 (D.N.M. 2016)
(typicality requirement for class certification was satisfied on claims brought by present and former
owners of royalty interests in oil and gas leases against oil and gas producers where proposed class
members shared same claims, regardless of variations in lease language, and all class members
benefited from proposed damages calculation).
II.

Rule 23(b) Requirements
A class action satisfies Rule 23(b)(3) if:
the court finds that the questions of law or fact common to class members
predominate over any questions affecting only individual members, and that a
class action is superior to other available methods for fairly and efficiently
adjudicating the controversy

Fed. R. Civ. P. 23 (emphasis added). The rule’s predominance requirement is related to but
“more demanding than” Rule 23(a)(2)'s commonality requirement. Naylor Farms, Inc. v.

The Court granted summary judgment to Defendant on Plaintiff’s Fourth Cause of Action which asserted that
Energen owes an “implied duty” to market under the terms of the Colorado leases and that the express provisions of
the Trust rendered the claim as “unnecessary and superfluous.” Doc. 232 at 7.
4

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Chaparral Energy, LLC, 923 F.3d 779, 789 (10th Cir. 2019) (citing Comcast Corp. v. Behrend,
569 U.S. 27, 34 (2013)). To satisfy Rule 23(b)(3), a plaintiff must “show that common questions
subject to generalized, classwide proof predominate over individual questions.” Id. The
predominance inquiry asks whether the common, “aggregation-enabling” issues in the case are
more prevalent or important than the non-common, “aggregation-defeating,” individual issues.
Id.
A Rule 23(b)(3) class must also be “superior to other available methods for fairly and
efficiently adjudicating the controversy.” Fed R. Civ. P. 23(b)(3). Matters pertinent to finding a
class “superior” under the rule include:
(A) the class members’ interests in individually controlling the prosecution or
defense of separate actions;
(B) the extent and nature of any litigation concerning the controversy already begun
by or against class members;
(C) the desirability or undesirability of concentrating the litigation of the claims in
the particular forum; and
(D) the likely difficulties in managing a class action.
A. Predominance
Rule 23(b)(3)’s predominance standard is “far more demanding” than the commonality
standard. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623-24 (1997). Predominance requires
that common questions must “predominate over any questions affecting only individual members.”
Rule 23(b)(3); see also Monreal v. Potter, 367 F.3d 1224, 1237 (10th Cir. 2004) (applying
Amchem).
Plaintiffs contend that the Class leases “are very similar in this language and create
common questions of both fact and law” based on the common claim involving the non-payment
for the Class Members’ gas used in order to move the hydrocarbons off the lease premises,
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including into and through gathering systems as well as in processing and treatment plant
operations. Energen points out that the differences in lease provisions regarding post-production
use of fuel gas means that damages must be calculated individually, and that different damages
defeat predominance. However, the fact that “damages may have to be ascertained on an individual
basis is not, standing alone, sufficient to defeat class certification.” Roderick, 725 F.3d at 1220
(“Material differences in damages determinations” will only destroy predominance if those
“individualized issues will overwhelm . . . questions common to the class”; Naylor Farms, 923
F.3d at 798 (finding individualized issues will not overwhelm issues common to the class because
there was evidence that plaintiff’s expert “can determine damages on a class[ ]wide basis through
use of a model,” thus obviating the need for individualized evidence). The Court agrees with
Plaintiff that the predominate question to be answered uniformly for all is whether Energen owe
and fail to pay royalty to the class on fuel gas. The class members’ gas (which is almost entirely
coalbed methane gas) was subject to only one gathering agreement. Exactly how much royalty was
owed to each lease owner is a separate question which would be addressed as a damages issue
which will be addressed separately. Moreover, the Court finds that the common evidence relating
to underpayment of fuel gas used off the premises will outweigh the individualized evidence that
may have to be considered in order to ascertain any damages related to how some of the individual
leases allocate post-production costs.
A. Superiority
Energen contends that a class is not a superior method for resolving this case because
determining liability and computing alleged damages requires an analysis of royalties paid to each
owner, each month, for each well. Defendant insists that resolving the Trust’s claims would
require forming multiple sub-classes for each type of royalty clause, including sub-groups

14

accounting for gas quality and composition. These arguments do not withstand scrutiny. The
Court has already determined that any differences in gas quality do not seem to be an issue in this
case since most gas is CBM that is sent to one third-party processor and so the specter of having
to create many sub-groups to resolve the liability and damages issues is somewhat of an
overreaction. Nor will the calculation of damages be unmanageable. As Plaintiffs suggest, total
class damages can be determined on a class-wide basis using Energen’s own paychecks.
Based on a review of some of the check stubs, see Doc. 244-6, many of the Class Members’
individual claims will be for amounts less than it will cost to prosecute and it would be
economically unfeasible to determine the royalty Energen should have paid for fuel gas in many,
individual lawsuits. See, e.g., Anchem Prods. Inc. v. Windsor, 521 U.S. 591, 617 (1997) (class
action achieves “economies of time, effort, and expense, and promote[s] . . . uniformity of decision
as to persons similarly situated, without sacrificing procedural fairness or bringing about other
undesirable result”). The Court therefore finds that a class action which aggregates the Class
Members’ claims is superior to forcing the putative Class Members to pursue individual and
expensive lawsuits. See Menocal v. GEO Grp., Inc., 882 F.3d 905, 917-918 (10th Cir. 2018)
(noting that class members “would have to overcome significant hurdles to adjudicate their
individual claims and thus have little “interest[ ] in individually controlling the prosecution or
defense of separate actions”).
III.

Rule 23(c)
Rule 23 contains an implicit threshold requirement that the members of a proposed class

be “readily identifiable. EQT Prod. Co. v. Adair, 764 F.3d 347, 358 (4th Cir. 2014) (“A class
cannot be certified unless a court can readily identify the class members in reference to objective
criteria.”); Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 592-93 (3d Cir. 2012) (An “essential

15

prerequisite” to class certification is that the “class must be currently and readily ascertainable
based on objective criteria.”); Fed. R. Civ. P. 23(c)(1)(B) (requiring Court to “define the class and
the class claims, issues, or defenses”).
Energen argues that the class cannot be ascertained because the lease language differs
regarding specific post-production deductions allowed and that its electronic records do not
indicate the individuals from whom the owners received their royalty interests so that it is unable
to figure out which owners are being paid with deductions and which ones are being paid without
deductions. Defendant’s witness, Kimberly Ming, explained in her deposition that Energen paid
royalties from “division orders” which do not show the names of the owners with a description of
their oil and gas leases.5 Ms. Ming stated that it was “possible” to generate a report of all royalty
owners who have exemptions but that Energen does not have a “ready cross-reference to which
lease [those individuals] belong to”). Doc. 240-13 (Ming Dep). at 32.
Plaintiffs aptly refer to this argument as Defendant’s “we lost track of which lease goes
with which owner” argument. It is based on Defendant’s assumption that in order to ascertain the
Class, the Court needs to separate out any differences in royalty language, but this is not so.
Energen again overlooks the current class description. All of Energen’s royalty owners under its
Colorado leases are putative class members because all of these putative class members allege
underpayment of royalty for fuel gas. As discussed previously, the class definition does not ride
on differences in royalty provisions for post-production deductions, but on Energen’s failure to
pay for gas used as fuel.
Energen relies on cases which found that a certain class could not be ascertained, but these
cases can be distinguished. For example, Defendant cites to Adair v. EQT Prod. Co., 320 F.R.D.

5

Samples of these “division orders” were not submitted to the Court as exhibits.

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379, 391 (W.D. Va. 2017) for the proposition that the class could be ascertained based on only on
government filings that identified the royalty owners. However, in that case one of the four
proposed classes was initially defined to include both former and current gas estate owners” and
so many gas estate owners were not readily identifiable. The proposed class in this case includes
only present owners. Further, the court in Adair also found that with regard to another of the four
classes, ascertainability was met when the class was narrowed to include only leases that were
silent on the issue of post-production costs. The class here has been narrowed to include all leases
where Energen failed to pay for has used as fuel. Energen also cites to Abraham v. WPX Prod.
Prods., LLC, where the court found that the class was not ascertainable because plaintiffs had
failed to identify which leases' gas had been or was being processed at named plants. 317 F.R.D.
169 (D.N.M. 2016). In contrast, Plaintiffs have created a chart describing the pertinent lease
language in all of the leases in the purported class. See Doc. 235-1; cmp. Abraham, 317 F.R.D. at
249 (suggesting that on remand, plaintiffs could “create a chart classifying lease types” to establish
predominance).
Energen contends that resolving ownership of the various leases in this case will be a
“complicated and individualized process” which should foreclose class certification. Doc. 240 at
11. Energen also argues that ascertainability is rendered even more difficult because not all of
names of the original lessors appear in the payment records produced in the Thiele lawsuit. See
Doc. 240-36 See Carol Thiele, et al. v. Energen Resources Corp., Case No. 15-CV-01475-DMEKLM. The Thiele case is a related oil and gas case that was filed in Colorado and has been stayed

6

The Thiele case is a related oil and gas case that was filed in Colorado and has been stayed pending resolution of
this case. See Carol Thiele, et al. v. Energen Resources Corp., Case No. 15-CV-01475-DME-KLM. This Court
denied Plaintiffs’ request for additional discovery and ruled that the discovery provided in the Thiele case regarding
the deduction of post-production costs could be used in this case. Thus, Energen’s reliance on the discovery
materials in Thiele

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pending resolution of this case. Doc. 212 at 5, n.4. This Court denied Plaintiffs’ request for
additional discovery and ruled that the discovery provided in the Thiele case regarding the
deduction of post-production costs could be used in this case. Energen’s reliance on the discovery
materials in Thiele as a reason for its inability to identify lease owners in this case is somewhat
confusing, since discovery in this case was never limited to Thiele, and the Court’s ruling simply
allowed use of the materials produced in that case rather than open up discovery yet again in a case
which has been in litigation since 2013. Finally, in response to Defendant’s argument that the
members of the proposed class are not “currently and readily ascertainable,” Plaintiffs make a
good point: it is hard to believe that Energen proceeded to pay royalty for over one hundred wells
in the State of Colorado without knowing who it was paying as well as each owner’s respective
decimal interest in each well determined from their leases.

Therefore, the Court rejects

Defendant’s argument that the members of the proposed class are not ascertainable.
CONCLUSION
In sum, the Court finds and concludes that Plaintiffs have met their burden for the
prerequisites under Rule 23(a) for numerosity, commonality, typicality and adequacy. The Court
also finds and concludes that Plaintiffs have shown that the common questions predominate over
any questions affecting only individual members and that resolution of the issues in this case in a
class is superior to determining liability and computing alleged damages requires an analysis of
royalties paid to each owner, each month, for each well. Finally, the Court finds and concludes
that the members of the proposed class are readily ascertainable.
THEREFORE,
IT IS ORDERED that Plaintiffs’ Narrowed Motion for Class Certification (Doc. 235) is
hereby GRANTED for reasons described in this Memorandum Opinion and Order.

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_________________________________________
CHIEF UNITED STATES DISTRICT JUDGE

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